Council OKs Deal With HD Supply That Could Net Santee $14M Over 20 Years

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The Santee city council voted Wednesday evening to enter into a deal with a new company in Santee that could net the city an estimated $14 million in extra sales tax revenue over the next 20 years.

HD Supply, the nation's largest supplier of maintenance, repair and operations items to the apartment industry, moved a 230 employee call center into Santee about three months ago. This deal establishes Santee as the point of sale for that operation, thus bringing sales tax on millions of dollars worth of sales into Santee coffers.

"This is an incredible opportunity for the city of Santee," said Councilmember Rob McNelis. "Based on current sales, our percentage might get us $600,000-$700,000 a year, for the next 20 years."

Here's the deal: If the sales tax revenue generated by HD Supply hits $500,000, the city would return 50 percent of the company's sales tax back to HD Supply (if the city gets $600,000 in new sales tax revenue from HD Supply, it would return $300,000 to the company). If less than $500,000 of new sales tax revenue is raised, the city keeps it all.

"This is an opportunity for the city to take advantage of sales tax revenue we don't have, but it won't impact the city by tearing up our roads with big trucks," said McNelis. "It won't change the quality of life for our citizens or anyone else."

"I feel really blessed that Santee got this, it's like a gift," said Councilmember John Ryan. "I don't see how we can lose on it. It's a great deal, we need to put our feelers out there and see if we can get some more."

Councilmember Jack Dale was a bit skeptical of the stability of HD Supply, saying the company lost money last year.

"It's my understanding that the company lost $1.2 billion last year," said Dale.

McNelis said HD Supply's biggest sector is the apartment and hotel maintenance department, the one department which is profitable within HD Supply, and the portion of the company operating in Santee.

"Is there a possibility we get stiffed in this deal?" asked Dale. "The contract also says we're in this thing for 20 years, but they can get out of it if they outgrow the facility. Looks like the city is stuck, but they can walk away."

The Santee City Attorney said HD Supply has an obligation to remain in business in Santee, but if they need to expand and no longer fit in their facility, they are required to find another spot in Santee, but if they can't find another spot they can move.

HD Supply currently has 25 years on their lease agreement for a 70,000 square foot call center in the Hartford Insurance building in Town Center. The company has 230 employees in Santee now, and according to McNelis doesn't plan to expand past 270.

The consensus of the council seemed to be that the city can't lose on the deal, as long as they consider the extra money "icing on the cake" and don't count on it for city operations.

"If we start to make decisions based on their continuing revenue stream, if they leave ten years down the line that could cause problems," said Minto.

"We believe this agreement will give us many reasons to stay, said HD Supply representative Ross Tanner. "We think it will be a positive and productive partnership with the city."

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